138. Scenario 17.2
Use the following to answer the questions.
The State Farm Group includes several companies. Probably the most well-known company in the group is the State Farm
Insurance company, the largest auto and home insurer in the United States. State Farm Insurance provides protection for
approximately 78 million policies on auto, fire, life, and health services. It is also a leading insurer of homes and autos in
Canada. Another company in the State Farm group is the State Farm Bank, which was opened in 2000, beginning State
Farm’s entry into the financial services field. However, the State Farm Bank is not a traditional bank, in that it has no
branch offices and its services are provided through State Farm agents, a call center, the mail, and on the Internet. It
currently serves over 1.9 million bank accounts.
Refer to Scenario 17.2. When deciding on its advertising allocation for the coming year, State Farm Insurance could
choose to spend the same amount as Safe Auto, another auto insurance company, or it could allocate an amount that is
10% of last year’s premiums. If State Farm uses the same amount as Safe Auto, this method of advertising appropriation
is known as the ____ approach; if State Farm uses the amount based on last year’s premiums, the method would be _____.
competition-matching; percent-of-sales
arbitrary; competition-matching
competition-matching; objective-and-task
arbitrary; objective-and-task
objective-and-task; percent–of-sales
139. Scenario 17.2
Use the following to answer the questions.
The State Farm Group includes several companies. Probably the most well-known company in the group is the State Farm
Insurance company, the largest auto and home insurer in the United States. State Farm Insurance provides protection for
approximately 78 million policies on auto, fire, life, and health services. It is also a leading insurer of homes and autos in
Canada. Another company in the State Farm group is the State Farm Bank, which was opened in 2000, beginning State
Farm’s entry into the financial services field. However, the State Farm Bank is not a traditional bank, in that it has no
branch offices and its services are provided through State Farm agents, a call center, the mail, and on the Internet. It
currently serves over 1.9 million bank accounts.
Refer to Scenario 17.2. If State Farm were to decide that its previous method of appropriating the advertising budget was
ineffective, it could decide to allocate 2 percent of its total annual sales to advertising. However, one problem with this
method is that
it makes the bookkeeping too difficult.
it is tied too closely to sales forecasts.
a sales decline leads to an increase in the advertising appropriation.
a drop in sales would cause a drop in the advertising budget.
competitors may have different advertising objectives.
MARK.PRID.16.17.02 – LO: 17–02
United States – BUSPROG: Analytic
United States – AK – DISC: Strategy
A-Head: Developing An Advertising Campaign
Bloom’s: Application